Homeowners can construct a second dwelling on their land

Gone are the days when only a dependant relative could reside in
the granny flat. The Policy allows homeowners to construct a second
dwelling on the land where their principal place of residence
stands. This second dwelling can be used to house a relative or as
a rental for an unrelated third party.
A secondary dwelling is defined as a self-contained dwelling
that is established in conjunction with a principal place of
residence on the same land. It can be attached or independent from
the principal place of residence

Outlay to income ratio for granny flats has advantage for
investors

The Policy came into effect in July 2009 so that affordable
rental housing could be delivered and current stocks
maintained.
The advantage for investors is simply the outlay to income
ratio. The construction of a granny flat can be done for as little
as $100,000 and of course no stamp duty, while the rental can be
$150 upwards a week. Such investors can still have the benefit of
tax deductions. By comparison, to buy a one bedroom apartment costs
$200,000 plus and then the stamp duty on top of that.
There is high ongoing demand for affordable housing in NSW. By
passing the Policy, the government aims to supplement public
housing with affordable rental properties built by private
investors.

Policy expands permissible use of granny flats

The Policy expands the use of the granny flat and also
streamlines the approval process by deeming granny flats to be
complying developments.
The key provisions of the Policy are:

Granny flats can be constructed in all residential zones
(clause 20)

Granny flats are complying developments (clause 23)

There are now design guidelines for complying granny flats
(clause 23)

Clause 20 of the Policy allows for construction of granny flats
in general residential (R1), low density residential (R2), medium
density residential (R3) and high density residential (R4) zones,
or in large lot residential (R5) zones via development
application.

Streamlined approval process for granny flats

Clause 23 of the Policy states that if the proposed secondary
dwelling meets the criteria set out in clause 23, then it is a
complying development. Complying developments are particular groups
of developments which have been previously assessed by the
certifying authority to have minimal or predictable environmental
impact. This allows the approval process to be streamlined.
This means a development application for a complying granny flat
may be approved by the relevant consent authority within 10 days,
as only a complying certificate is required and not a development
approval.

When is a granny flat a complying development?

The requirements for a granny flat to be a complying development
include:

not including the construction of a basement or alterations to
existing basement

not including the erection of a roof terrace

satisfying development standards set out in Schedule 1 of the
Policy

So whether your proposed granny flat is for traditional use or a
source of income or both, the decision to capitalise your principal
place of residence has become easier because you know there will be
a financial return on your investment.